This Post is part of the “FREE Wholesale Training Course”. You can view the entire course listing and introduction to the course here.
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Module 1: Wholesale Mindset
- Introduction to wholesale mindset
- Differences between sourcing methods
- Skill sets needed to succeed in wholesale sourcing
- Prepare your mind for thinking wholesale all the time
- Wholesale lingo and terminology
You can click on each of the links above to go directly to the area of the module the best interests you. That being said, lets get right into the content!
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Wholesale lingo and terminology
There are quite a few words and phrases you’ll hear throughout this course, and when talking to potential wholesale companies that you may be unfamiliar with. Here’s the terms and their definitions:
Back-Order: Products that you have ordered but they have not shipped. This is usually due to depleted manufacturer’s inventory.
Bank Reference: Contact information for the bank you have your business checking account with. Suppliers will typically ask for this if you are applying for credit terms.
Bill of Lading (BOL): A legal document between the shipper of goods, and the carrier. Generally when items are shipped via LTL, the truck driver will hand you a BOL to sign off on. When you do so, it legally transfers the property of the items from the shipping company to you.
Business License: This is a license that may be issued by a city or county. Not every city/county requires this – check your local jurisdiction.
Case Pack: This is the number of units that come in a case. Sometimes you will see “inner case”, “outer case” or “master case”. It really means there are three potential levels of case packs. For example, a master case may have 48 units, outer case 24 units, and inner case 12 units. The supplier may say you have to order in a specific type of case pack. To stick with this example, if they say you can only buy in outer case packs, you have to buy in sets of 24 units .
Company Credit Card: A credit card that has your company name on it. When you sign up for your first one, you will likely need to personally guarantee it with your personal credit. At times, manufacturers / brand owners may ask specifically for a company credit card.
Cooperative Advertising: When a manufacturer, brand owner or distributor shares advertising costs with a retailer.
Cost of Goods Sold: The amount paid for wholesale merchandise sold including delivery costs.
Distributor: An intermediary between manufacturers / brand owners and retailers. They purchase from manufacturers or importers in quantity, and re-sell the items to secondary wholesalers or retailers.
FEIN or EIN: Federal Employer Identification Number. Suppliers will ask for this to ensure you are a legit company.
FOB (Free on Board): The physical location where goods transfer from the seller to the buyer.
Gross Profit: The difference between GROSS sales and the cost of goods sold (COGS) before operating expenses are taken out to determine net profit.
In-House Accounts: Some companies will use outside sales reps to sell their items. An In House account is when your account is handled by someone inside the company selling the item.
Independent Sales Representative: One person or a couple working as a commissioned sales representative.
Keystone Pricing or Keystoning: Doubling the wholesale cost by the retailer. This is usually the recommended markup by most manufacturers / brand owners.
Less Than Truckload (LTL): This is when you order items and they are shipped via pallet. If the amount of pallets you order are less than the amount that can fill up a full truck (roughly 26 pallets), it is called “Less Than Truckload”.
Manufacturers Representatives: Independent sales representatives, that represent one or more manufacturers / brand owners. They will typically take orders from retailers on behalf of the manufacturers / brand owners and usually serve as customer service contacts.
Manufacturers Suggested Retail Price (MSRP): The price the manufacturer recommends that a retailer should sell the item for.
Margin / gross margin: The percentage of the COGS / Selling Price
Mark-up: The dollar amount or percentage that a product is “marked up” from the cost, to create a wholesale or retail price.
Minimum Advertised Price (MAP): The price the manufacturer / brand owner does not want a product to be sold less than. Amazon notoriously has problems with complying with MAP guidelines.
Minimum Order Quantity (MOQ): This specifies the lowest quantity of a certain product a supplier is willing to sell. Some companies may say “you must order at least $500 on a transaction”. That would be the MOQ for that specific supplier, and can be spread among multiple products. MOQ’s for some suppliers may also be case packs.
NET 15, NET 30, NET 60: When establishing credit terms with a supplier, they will typically offer a grace period for how long you can take to make a payment. The number after NET represents the amount of days you have to make a payment of the net balance. So, NET 15 = 15 days, NET 30 = 30 days, etc.
Net Profit: Gross profit minus operating expenses.
Niche Market: A specific segment of a market. Think – not big box stores.
Open-to-Buy: The amount of money you have available to purchase inventory.
Order Lead or Turn Around Time: The amount of time from when the order is placed to when it hits your warehouse . This may also represent the total amount of time from when you place the order until it hits Amazon’s warehouse (which may include processing time in your warehouse.)
Pallet: A platform used for moving things. Generally they are made of wood or plastic. They are designed to make large amounts of items easy to move with pallet jacks and forklifts.
Resale Certificate: This is a certificate that’s issued by the state you do business in that shows your retailer status. Also known as “tax exempt form”.
Retailers: Companies that sell products to end consumers. If you buy items wholesale to sell items on Amazon, you are a retailer!
Retail Price: The price a retailer is selling the item for.
Sales Promotion: Marketing activities that are used to give discounts to consumers. This generally makes sales go faster. At times, you can ask brand owners to help in the cost of sales promotions.
Suppliers: Companies that you purchase product from.
Terms of Credit: Some companies will offer “terms”, which usually means they are giving you credit to purchase the items. Somewhat similar to a line of credit from the bank, but specific to the supplier.
Trade References: These are companies that you already have accounts with, and are doing business with. You’ll see this a lot on applications, and specifically if you are asking for credit terms.
W-9 Tax Form: This is a form that is supplied by the IRS to validate a tax ID number and company address. A supplier may ask you to fill one out – specifically if you are asking for credit terms.
Wholesaler (secondary): Similar to a distributor, EXCEPT they generally do not have a sales force or offer on-site delivery, instead shipping to retailers by common carrier from one or more central warehouses.
Wholesale Price: The price a manufacturer, brand owner or distributor places on a product to be sold to a retailer, who will then mark up the product for their customers.
Wholesale Showrooms: A place in large cities where potential suppliers will show their wares to retail buyers. A typical facility will offer hundreds of booths on multiple floors with many brand owners and manufacturers. In some cities, there will be “permanent” and “temporary” booths. Permanent are booths where the companies are always there. Temporary will only be there for a short period of time.
Wholesale Trade Shows: Large marketplaces where there are hundreds or thousands of exhibitor booths. They are typically temporary, and are in a specific city for a specific amount of time. Manufacturers reps, importers, manufacturers, distributors and brand owners will buy the booths to show off their wares. Only buyers from that industry can attend.